Business ethics principles and applications

Business Ethics

Whether or not some countries have more corrupt business practices is a delicate question. Corruption is in the eye of the beholder.

To Western eyes, some countries are more corrupt than ours. This can derive from a number of reasons. One is the culture, which in many countries accepts certain behaviors we would define as corrupt. Another is that corruption has evolved as a means to overcome shortcomings in the economic system. For example, some officials demand bribes because their governments do not pay them enough to live on -the bribes may appear corrupt but are essential within the context of that country's economic system to maintain qualified individuals in positions despite a bankrupt government.

Economics and culture are two of the main underlying reasons for the differences in corruption in different countries. There are other underlying causes as well. Weak legal systems contribute to corruption, because the economic system lacks any real mechanism for eliminating corrupt practices. Another contributing factor is the availability of corruption. Bribes are taken because bribes are made available. If nobody were willing to offer a bribe, nobody would be able to take one.

Bridging the gap between differences in perceived corruption requires dealing with each of these underlying issues in turn. The first step is to build a strong rule of law. This provides the mechanism by which corrupt practices can be discouraged. The second step is to reduce the availability of benefits of corruption. This can start with Western firms refusing to engage in corrupt practices overseas. Culture change is the last and most difficult change that needs to be made. The people within the culture will not change their orientation towards corruption until they can see that greater wealth and greater opportunity derive from an economy free of corruption than from one with corruption.

2) Bribery is a problem that is self-perpetuating. The availability of bribes in the marketplace as a means of doing business encourages companies and officials to seek out bribes. It is of special concern when Western firms offer or pay bribes, because when this happens, it essentially justifies the official's asking for a bribe.

For Western officials to eliminate bribery, the first step they need to take is to cease offering bribes. This works in two ways. First, it reduces the instances of bribery and the amounts involved. There will be no bribery bidding wars. Second, it gives Western firms a moral ground from which to debate the issue of bribery. It is perceived as disingenuous at best for Westerners to decry bribery while simultaneously offering bribes. If the West is to have its way with respect to eliminating bribery, Western firms have to hold a high moral ground on the issue.

US laws contribute to these objectives. It is illegal under U.S. law to offer bribes in foreign countries. In some cases, this merely drives the bribery underground, making it more difficult to prove and to prosecute. In other cases, though, it discourages U.S. firms from offering bribes. In some cases, however, the inability to offer a bribe will put a U.S. firm at a competitive disadvantage.

Thus, U.S. firms often find it is important to try and level the playing field. There are many options that can be used to achieve this end. First, if all Western companies band together to enact similar laws, they will all at least be on a level playing field with one another. This may still put them at a disadvantage, but they can enjoy other competitive advantages, such as technological advantages or experience, which can help them overcome this gap. Other measures can include sanctions against foreign companies that are engaged in bribery. This many motivate the governments of those countries to take stronger measures towards eliminating bribery.

3) There are a couple of reasons I think Starbucks has been so concerned about its corporate social responsibility. One is that it helps cultivate a positive image of the company, which can help to both attract and retain customers. Another reason is that the company comes from a culture in the Pacific Northwest where philanthropy and social responsibility is more accepted in business. This cultural difference may have impacted the overall philosophy of Starbucks with regards to this issue. Also, Starbucks is a high-profile company. They open themselves up to significant negative publicity if they engage in social irresponsible acts. Maintaining a high level of corporate social responsibility is therefore a defense against potentially damaging criticism.

Starbucks' various relationships are generally positive. Versus their peers in the coffeehouse business or in the fast food business, Starbucks treats their employees well in terms of pay and benefits. In general, they treat their customers well. They understand that customer satisfaction with "the Starbucks Experience" is a key element in their competitive strategy, so take care of the needs of their customers. The suppliers are treated reasonably well. Starbucks has a high level of power over most of their suppliers and has high expectations, but they do not squeeze their suppliers unreasonably. The company has come under fire for not using more fair trade coffee, but this is unreasonable criticism as there is not enough fair trade coffee in the world to supply Starbucks. The shareholders at Starbucks are treated well. Prior to the last couple of years, Starbucks has grown rapidly and the shares have seen significant appreciation in value.

4) Starbucks has grown rapidly because of their product and service offering. Strong corporate social responsibility is not at the core of Starbucks' competitive mix. They have cultivated carefully their image, the Starbucks Experience and their product offerings. These drive business. The social responsibility is nice to have, but it is not what brings people into Starbucks stores.